Billionaire Found in Middle of Bribery Case Avoids US Probe

In January, a unit of Alcoa Inc., the biggest U.S. aluminum producer, pleaded guilty to foreign bribery charges brought by the U.S. Justice Department. Alcoa also settled claims by the Securities and Exchange Commission and agreed to pay a $384 million fine — the fifth-largest such penalty ever.

The Alcoa subsidiary admitted to paying bribes to government officials in Bahrain for more than a decade to win contracts to sell alumina, a compound essential in making aluminum, to the Persian Gulf state’s processing plant. Not named and not charged in the case was the person who made those payments, whom the Justice Department identified in court only as “Consultant A.”

In the thriving business of global bribery — which the World Bank says amounts to $1 trillion in illicit payments annually — guilty pleas like the one by Alcoa’s unit are rare. Rarer still are convictions against the people who actually arrange and deliver the payments, Bloomberg Markets will report in its September issue.

Most of the time, these brokers aren’t even named. The Alcoa guilty plea — together with related cases in the U.K. and Norway — provides an unusual window into the modus operandi of the middlemen who shuttle between companies and governments striking deals.

Before the U.S. announced the fine against Alcoa, U.K. prosecutors in October 2011 charged Victor Dahdaleh, a London-based businessman, with laundering money and making improper payments to officials in Bahrain related to Alcoa contracts.

Not Illegal

His lawyers argued in a London court last year that the payments Dahdaleh, 70, made to government officials in Bahrain were sanctioned, akin to taxes in the country, and therefore were not illegal.

Dahdaleh was acquitted in December after the prosecution dropped its case, saying that two U.S. lawyers who were set to be witnesses had refused to testify and that testimony by Bruce Hall, the plant’s former chief executive officer, differed from earlier statements.

An Alcoa Australian unit sold the alumina to Consultant A’s companies, which in turn sold it to Aluminium Bahrain BSC, known as Alba, according to the U.S. case. Alba is one of the world’s largest aluminum smelters. Norway, which fined a shipping company $5 million in May for bribing foreign officials to win the delivery agreements to move the Alcoa alumina from Australia to Bahrain, cited Dahdaleh by name as the person who made those payoffs. Norwegian authorities didn’t charge Dahdaleh.

‘No Reason’

Dahdaleh declined to comment for this story. Norton Rose Fulbright, his U.K. law firm, says in a written response to questions from Bloomberg Markets that Dahdaleh was acquitted of all charges in the U.K.

“There is therefore no reason for diluting the proper effect of the acquittal,” the firm says. It says that Dahdaleh wasn’t party to the Alcoa unit’s guilty plea in the U.S. nor the Norwegian settlement. “Those agreements do not detract from Mr. Dahdaleh’s acquittal by a competent court in the U.K., which heard all the facts of the case given by witnesses on oath,” the firm says.

The law firm didn’t answer most of the specific questions, including whether Dahdaleh is Consultant A or whether he owns any of the companies the U.S. Justice Department said were used to make payoffs.

Revoked Bail

Dahdaleh’s U.K. trial had been slated to begin in April 2013. It was postponed until November after he and his lawyers allegedly met with a key prosecution witness, Mahmood Hashim Al Kooheji, the current chairman of Alba. Judge Nicholas Loraine- Smith revoked Dahdaleh’s bail for failing to steer clear of witnesses before the trial, as he’d been ordered to do. He sent Dahdaleh to jail for a month.

For decades, multinational corporations have used little- noticed middlemen to make payments for contracts in murky Middle Eastern deals, says Norman Bishara, associate professor of business law and ethics at the University of Michigan’s Ross School of Business.

“In the Middle East, there is a concept called wasta — ‘connectedness’ — a trust network that these intermediaries are part of,” says Bishara, whose research focuses on Middle Eastern business ethics. “You traditionally use middlemen to avoid accountability and transparency, especially with this kind of large corporation, such as Alcoa. You use intermediaries to keep everything at arm’s length.”

Island State

Bahrain, a small island state of 1.3 million people, gained its independence from the U.K. in 1971 and is ruled by a constitutional monarchy. Bribery there is a criminal offense.

Bahrain has been condemned by human rights groups for a deadly crackdown on pro-democracy protesters during the Arab Spring rebellions in 2011 and the suppression of smaller demonstrations since then. Transparency International, a Berlin-based nongovernmental organization that monitors business ethics around the world, finds currently that 120 countries out of the 177 ranked are more corrupt than Bahrain.

While the U.S. plea agreement doesn’t identify Dahdaleh as Consultant A, it does show that a company owned by Dahdaleh played a role in the Alcoa unit payments to Alba. The plea agreement says that Consultant A held an account in the name of United Legal Engineering Consultants Ltd. That company — based on Jersey, in the Channel Islands — was 70 percent owned by Dahdaleh, according to annual reports filed by United Legal.

Wired Money

Consultant A transferred funds into the United Legal account and wired money from it to accounts held by government officials in Bahrain, the plea agreement says. U.S. prosecutors say they haven’t ruled out pursuing individuals. So far, no one has been indicted.

The plea agreement sheds light on how Consultant A managed the payments between Alcoa units and Bahrain’s Alba. Under the arrangement described in the case, Consultant A’s shell companies, which are registered in the British Virgin Islands, would buy alumina from Alcoa of Australia.

The unit would ship the alumina directly to Alba. Consultant A would receive credit lines from Alcoa to cover the cost until Alba paid his shell companies. Consultant A inflated the alumina price for the sales to Alba by about $400 million over 20 years, the U.S. charging document says.

That markup provided about $100 million for bribes paid by Consultant A to members of Bahrain’s royal family and Alba officials, according to the Justice Department.

‘With Connections’

“Alcoa’s subsidiary used a London-based consultant with connections to Bahrain’s royal family as an intermediary to negotiate with government officials and funnel the illicit payments to retain Alcoa’s business as a supplier to the plant,” the SEC wrote in January when it charged Alcoa Inc. in a civil case with violating the Foreign Corrupt Practices Act.

Alcoa settled the SEC case by agreeing to pay a $175 million fine. Alcoa’s unit ended the criminal case, agreeing to pay $209 million, guaranteed by the parent company. Because the Alcoa unit pleaded guilty, there was no trial in the U.S. and no one, including Dahdaleh, was called to testify.

The man the U.K. accused of conspiracy to corrupt, corruption and money laundering in the multinational bribery plot looks like a kindly grandfather. Short and pudgy with a round face and balding head, Dahdaleh walks with his shoulders slightly hunched. He has difficulty hearing, a matter addressed in court when a British judge allowed him special seating in the courtroom.

Management Degree

Victor Phillip Michael Dahdaleh was born in Ramleh, Jordan, according to his Canadian passport. Dahdaleh is a citizen of Jordan, Canada and the U.K. He was a part-time student at the London School of Economics and Political Science in 1967; he didn’t finish with a degree. He received a diploma in management from McGill University in Montreal in 1975 and speaks English, French and Arabic.

Dahdaleh owns Dadco, a private manufacturing and investment business founded in 1915, according to Dahdaleh’s own website, victordahdaleh.com. The company originally supplied construction materials to Middle Eastern contractors and sold phosphate, a chemical sometimes used in smelting, Dahdaleh has told associates.

Dahdaleh is a man with a common touch, friends say. He’s a fan of singers Johnny Cash and Gordon Lightfoot, and one of his favorite songs is Cash’s “Folsom Prison Blues.” Friends say he can recite most of the lyrics.

In one of his first jobs after college, Dahdaleh was in a BP Plc management training program in Canada. He drove a fuel truck during that time. He hit it off with the other drivers and drank beer with them, according to his friends.

‘Home-Cooked’

One of Dahdaleh’s distant cousins, John Dahdaly, president of Cullitons Limousine Service LLC in Toronto, says that when Victor lived in Canada in the 1970s, he enjoyed talking about his favorite home-cooked dishes, music and the Antiochian Orthodox Christian church at which the family worshiped.

Dahdaleh owns a five-story town house in London’s Belgravia neighborhood, which U.K. real estate broker Savills Plc describes as one of the wealthiest enclaves in the world. He also resides in Switzerland. British investigators who have inspected Dahdaleh’s bank accounts say he has amassed a fortune of more than $1 billion.

Dahdaleh moves in elevated circles. He donated at least $1 million to the Clinton Foundation from 2001 to 2008, foundation records show. The organization was started by former U.S. President Bill Clinton in 2001 in an effort to get governments, businesses and people to work together to improve society.

Clinton Travels

Dahdaleh arranged in 2005 for Clinton to speak to the Canada–United Kingdom Chamber of Commerce in London, an event sponsored by Dadco, a chamber brochure shows.

In 2009, Clinton traveled to a refinery owned by Dahdaleh near Hamburg and gave a speech there, according to a spokesman for the Clinton Foundation. From there, Clinton and Dahdaleh flew together to Vienna, where the former president spoke at a benefit for people with AIDS.

Dahdaleh has served on the Court of Governors of the LSE since 1999. For a decade, he held the position alongside Cherie Blair, wife of former British Prime Minister Tony Blair. Dahdaleh arranged for Tony Blair to address the Canada-U.K. group in 2006, according to chamber of commerce brochures. “Victor, as you know, is very influential in the Global Initiative of President Clinton,” Tony Blair told the group. Blair and his wife declined to comment on their relationship with Dahdaleh.

Robert Rubin

Dahdaleh has also donated more than 1 million pounds ($1.7 million) to the LSE since 1999. Over the past decade, he has attended the LSE’s iXXi breakfast club, an exclusive gathering of politicians and bank executives held at London’s Savoy hotel that has hosted speakers such as former U.S. Treasury Secretary Robert Rubin, says Meghnad Desai, emeritus professor at the LSE, who created the club.

Dahdaleh’s foray into Bahrain began in the 1980s, when he was an agent in the Middle East for Pechiney SA, a French aluminum company that provided consulting to Alba. Dahdaleh turned to the French embassy in Bahrain for help in getting the proper introductions to members of the Bahraini royal family and others, says Gudvin Tofte, a Norwegian who was CEO of Alba until 1999.

Jeremy Nottingham, a former Alba executive, recalls how Dahdaleh demanded his attention at all hours. As Nottingham drifted toward sleep one night in 2000, the phone rang. It was almost midnight in Bahrain.

“Hello, Jeremy, I’ve just arrived. Got delayed by the prime minister of Kuwait. Can I see you now?” the caller asked. It was Dahdaleh. Nottingham, a South African who was deputy CEO of Alba at the time, rose, threw on a suit and, against his wife’s protests, drove 10 minutes to the Ritz-Carlton hotel on the Persian Gulf.

Family Talk

Dahdaleh, in a dark suit and tie despite the hour, ushered Nottingham into a lavish suite and offered him coffee, Nottingham says. The two men talked for hours.

Nottingham says he had been summoned several times to these late-night meetings with Dahdaleh, and the drill was always the same. Dahdaleh asked at length about Nottingham’s family, a chattiness that seemed out of context, Nottingham says, considering the urgency of Dahdaleh’s call.

Dahdaleh finally turned to business, Nottingham says — pressing him for details about plant activity, purchasing plans and strategic goals at the company.

Nottingham says that even though Dahdaleh didn’t have a job with Alba, he had considerable influence with the company. Nottingham says when he complained of being the company’s perpetual CEO designate, never the boss, Dahdaleh told him not to worry, that he’d be promoted soon.

‘Really Close’

“I knew he was really close to the chairman and the prime minister,” Nottingham says. “I was first introduced to him by the oil minister. The reason that I would go and see him at all hours was that he said he would be instrumental in making me CEO. It’s probably for the best that I never got that position.”

At that late-night meeting in 2000, Dahdaleh asked Nottingham what was needed to turn Alba into a world-class company, the former executive says. Nottingham’s answer: Stop the system in which Alba’s suppliers and contractors were decided based on payoffs and kickbacks.

After that, Nottingham says, Dahdaleh no longer called him. Soon he learned Dahdaleh was pushing Bruce Hall, an Australian, as the next Alba CEO. Hall got the job in 2001. After that, the new CEO began meeting with Dahdaleh in his hotel suite in Bahrain, Hall testified in a London courtroom in November.

Share Commissions

Nottingham, who’s now back in South Africa as a mining consultant, has never been charged with or implicated in any wrongdoing.

When Hall became CEO, Dahdaleh let him know he had agreements with several European companies looking to do business with Alba and that he was prepared to share commissions when those companies received work from Alba, Hall testified at Dahdaleh’s trial in Britain.

The U.K.’s Serious Fraud Office, or SFO, charged Hall in 2012 with conspiracy in accepting about $4.9 million in bribes for contracts. Hall pleaded guilty last year. He was sentenced in July to 16 months in prison. Hall declined to comment for this story.

Dahdaleh’s role at Alba came under pressure beginning in 2005. That’s when Sheikh Salman bin Hamad Isa al-Khalifa, Bahrain’s U.S.- and U.K.-educated crown prince, vowed to end payments for contracts and reform government-owned businesses. Hall was replaced, and a year later, Sheikh Isa bin Ali Al Khalifa was replaced as chairman.

Kroll Inquiry

In 2006, the Bahraini government hired investigative firm Kroll Inc. to conduct an inquiry of Alba. The company is vital to Bahrain, responsible for 10 percent of its gross domestic product and 70 percent of all nonoil exports. It’s among the largest employers, with almost 3,000 workers.

Kroll’s report, which the government received in parts as the probe progressed over two years, cited rampant corruption. Alba’s new managers hired Washington-based law firm Akin Gump Strauss Hauer & Feld LLP to pursue individuals and companies suspected of wrongdoing.

Alba sued Alcoa Inc. and Dahdaleh in 2008 in the U.S., alleging that Alcoa used Dahdaleh as an agent to make illicit payments for contracts with Alba. Alcoa settled that suit in 2012 by paying Alba $85 million. Alcoa didn’t admit or deny wrongdoing.

A U.S. federal judge dismissed Alba’s lawsuit against Dahdaleh in April, ruling the case should instead be heard by a panel of arbitrators in the U.K. Alba filed an appeal of that decision in May.

‘Favorable Outcome’

Salman Al Jalahma, a spokesman for the government of Bahrain, says it’s satisfied with the Alcoa settlement.

“We are pleased with the favorable outcome of the lawsuit,” he says. “We hope this serves as a catalyst towards ending corruption.”

The Alcoa plea agreement with the Justice Department alleges that Consultant A gave Sheikh Isa some of the payments for alumina. Sheikh Isa, who’s a brother-in-law of Bahraini Prime Minister Khalifa bin Salman Al-Khalifa, became chairman of Alba in 1998.

Dahdaleh developed a close relationship with the sheikh, says Tofte, the former Alba CEO.

“He was getting his will with Sheikh Isa,” Tofte says. He says Dahdaleh knew how to win the trust of people in power. “He was absolutely clever at getting people to believe what he was doing,” Tofte says. “He was a talker.”

‘Going Downtown’

Sheikh Isa personally decided which suppliers would win contracts with Alba, and major awards almost always involved payoffs, Hall and Nottingham testified in the U.K. case against Dahdaleh. Any contract in excess of 100,000 dinars — or about $265,000 — had to be approved by the sheikh, they testified.

The process was called “going downtown,” which is where the sheikh’s office was located, Nottingham testified during the U.K. trial.

Sheikh Isa, who was also the oil minister in Bahrain, referred to Dahdaleh as “my friend in London” when discussing business involving him, Hall testified in the U.K. case against Dahdaleh. No one has brought charges against Sheikh Isa.

“Sheikh Isa denies categorically all allegations of corruption, bribery, impropriety and unlawful acts reported against him personally,” Ardavan Amir-Aslani, his Paris-based lawyer, wrote in a statement following the U.S. plea agreement. Amir-Aslani declined to comment further.

From 1989 to 2009, Alba was one of the largest customers of Alcoa’s global alumina and refining business, the SEC said in January when it brought its civil case against Alcoa Inc.

‘Corrupt Payments’

The SEC said corrupt payments of more than $110 million were made to Bahraini officials with influence over contract negotiations between Alcoa’s units and Alba. Alcoa’s Australian subsidiary first retained the person to arrange the deals, the SEC wrote.

Alcoa spokeswoman Monica Orbe says that it was just the company’s subsidiary that admitted to wrongdoing.

“There is no allegation in the filings by the DOJ and there is no finding by the SEC that anyone at Alcoa Inc. knowingly engaged in the conduct at issue,” she says. She declined to comment on Dahdaleh or on the use of middlemen in contracts.

While the SEC didn’t accuse named individuals at Alcoa Inc. of wrongdoing, it alleged in its January civil case against Alcoa Inc. that the company failed to do its due diligence to stop its subsidiary from paying bribes for contracts.

‘Lacked Controls’

“Alcoa lacked sufficient internal controls to prevent and detect the bribes, which were improperly recorded in Alcoa’s books and records as legitimate commissions or sales to a distributor,” the SEC wrote. Orbe declined to comment on any U.S. documents in this case.

Dahdaleh faces another probe. Swiss authorities are investigating him on suspicion of money laundering and bribing foreign officials, according to Jeannette Balmer, spokeswoman for Switzerland’s Attorney General’s Office.

Dahdaleh’s website reported good news in December. On the day he was acquitted in London, Britain’s SFO said there was no realistic chance of convicting him on any charges without its key witnesses.

On Dahdaleh’s homepage, a streaming Breaking News headline, which was still there as of yesterday, declares, “Victor Dahdaleh clears his name.”